Kik Messenger expands its platform from messaging to monetization

Anyone who pays even cursory attention to the mobile ecosystem knows that the over-the-top messaging segment is the hottest thing going. More than 45 percent of all smartphone owners now use some form of instant messaging or OTT messaging app in addition to or instead of traditional SMS, according to a survey conducted in late 2012 by Analysys Mason.

Investors are definitely taking notice: Earlier this month, Waterloo, Ontario-based Kik Interactive closed a $19.5 million Series B funding round led by Foundation Capital, bringing its total financing to $29.1 million. The firm's free Kik Messenger application supports chat-based conversations across platforms including Apple's (NASDAQ:AAPL) iOS and Google's (NASDAQ:GOOG) Android and lets users sign in with their Kik username, not their phone number, to guarantee control over their privacy. Kik Messenger recently surpassed 50 million users and is adding 200,000 new users per day.

Kik Messenger also integrates HTML5-powered apps called Cards. The Cards layer enables Kik to quickly create and deploy cross-platform apps within the Messenger client, allowing users to find and share YouTube videos, forward images or create sketches without exiting the app. Consumers have downloaded more than 25 million Cards since the feature launched last November, and the Cards platform will play a critical role in Kik's plans to monetize its business moving forward.

Kik Interactive CEO Ted Livingston spoke to FierceDeveloper contributor Jason Ankeny about the firm's surging adoption, building out its platform and the importance of anticipating new opportunities.

Ted Livingston

Ted Livingston on Kik's growth spurt: It's the space we're in. Everyone's getting a smartphone, and communication is the killer app. Everyone is communicating over text messaging. We are playing in the killer app for mobile.

Beyond having a great product, the thing that's different about Kik is that we base your identity on your username instead of your phone number. If you want to talk to somebody new, you don't want to give them your phone number--what if they're annoying? We let you create a username just for Kik, and we give you complete control over it, which gives you complete control over your privacy. If someone does get annoying, you can block them. Not only are we a good way to talk to people you know, but we're also the best way to talk to people you don't know.

We've spent zero dollars on marketing. It's all viral--pure word of mouth. iOS and Android together make up 99 percent of our userbase--the other platforms are negligible. iOS is leading the way for us. Other [competing] apps are more about Android. Those other messengers are successful in markets where SMS is expensive, whereas Kik is most successful in the U.S., where the iPhone is dominant and where the value proposition of free SMS isn't that powerful. Privacy is what sets us apart.

Squared - Cards

Squared is a game available through Kik Cards.

Livingston on Kik Cards: Let me go back to the beginning. When we launched in 2010, we experienced insane viral growth--we went from 1 million downloads in two weeks to 2 million in three weeks. It was the fastest growing app in known human history. One day my mom called to tell me that Whoopi Goldberg was talking about Kik on The View. It was wild.

Then [Research In Motion, now BlackBerry (NASDAQ:BBRY)] tried to shut us down. They took us out of [BlackBerry] App World, took away our push notification functionality and sued us for patent infringement. That fundamentally broke our product for everyone on BlackBerry but also for anyone on other platforms talking to anyone on BlackBerry. It killed our growth. It was devastating. We went from being nobody to the top of the world and back.

I said "We can still win this. We just need to figure out how." I knew we needed to add something that would differentiate our user experience, but not kill the simplicity at the core of the experience. We had to add features, but not ruin the core experience. We needed to become a platform--we needed to take a simple messaging app and integrate it into other games and apps, to give you other experiences. Our competition is just figuring that out now.

Two years ago, we rolled out our native platform, which allowed you to integrate your native iPhone or Android app into our native app. We wanted to enable simple sharing in mobile apps through the Kik platform. But we realized quickly that the user experience was really awful. I thought "This is crazy. It doesn't work like this on the desktop. We should be able to send you a link so you get the app in one click. We need to make the Web work on mobile."

With Cards, instead of integrating native apps, we integrate Web apps. We Kik you an invite to an app or game--it's a one-click, two-second process. Now you're playing the game with me right away. But it took us two years from "This native platform is not going to work" to having a Web platform ready. With HTML5, how do you build an app that feels as good as native? There were no tools, so we had to write them from scratch. Where do you discover HTML5 apps? Where do HTML5 apps live once I have them? How do push notifications work with HTML5 apps? We had to tackle all these problems one at a time. Some were easy, and some were much harder.

It took two years, but the result is that we put in all that work, and now when I discover a cool new app, I just Kik it to you--one click later, you're up and running. It's better for developers and users. Getting there was climbing like Mount Everest, but it's nice that we're finally at the top.

The BlackBerry suit is still ongoing two years later, so I can't comment on that. Nothing has happened in months.

Livingston on monetizing the Kik platform: The interesting thing about mobile messaging is that it's extremely viral, but impossible to monetize directly. If you try to sell something, users get cynical and go somewhere else. What you can do is take that killer app and leverage it into a platform, and monetize things around that platform. Because it's the Web, there are a limitless number of monetization options.

Kik absolutely will remain free. If I was a Kik user and someone told me I had to pay, I'd say 'No. I hate you. You lied.'

Livingston on developing across multiple platforms: It's a huge pain. We support five platforms, and we haven't updated three of them [BlackBerry, Windows Phone and Symbian] in over a year. You have a vision for what you want a release to include. You have to influence on it each platform, customize for it each and make sure the experience is consistent across each platform. Thank goodness we're venture-backed--otherwise, there's no way we could do it.


Kik Messenger lets users share a variety of content.

Livingston on the exploding OTT messaging segment: This is not the first time messaging has gotten hot. Think back to South by Southwest 2011 and the group messaging wars we saw. But then Beluga got sold to Facebook (NASDAQ:FB), GroupMe got sold to Skype, and the heat around the area disappeared.

What's recently happened is that people are seeing how powerful these platforms are in the Far East. Facebook is becoming purely about messaging--look at Home. You've also got Google trying to buy WhatsApp and building Babel. The first one to build out their platform is going to win the mobile era.

The advantage for companies like Kik and WhatsApp is that we're native to the mobile era. We're not trying to adapt a legacy platform from the desktop era. We've seen IBM losing in the PC era to Microsoft (NASDAQ:MSFT), or Microsoft losing in the Web era to Google. With each new era, the fundamental experience changes, and companies that build from scratch can win. Of course Facebook and Google will try to compete, but they're adapting platforms and making compromises. We're building our platform from ground up.

Livingston's advice for aspiring mobile developers: Get on new platforms early. For us, our big stroke of luck is that we launched right beside where BlackBerry is based. I worked at RIM in 2007 as a student before the iPhone even existed. I saw the mobile opportunity and jumped on the platform before a lot of others did. Look at Zynga (NASDAQ:ZNGA) jumping on Facebook--the key is figuring out the next fundamental innovation, and getting there before everyone else.

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